Holding companies in Colombia

Law 2010 of 2019 on Colombian Holding Companies (CHC), which developed the principle already established by the 2018 tax reform (Law 1943 of 2018), stipulates the following:

1. Domestic companies that have as one of their main activities the holding of securities, investment or holding of shares or participations in Colombian and/or foreign companies or entities, and/or the administration of such investments, may be subject to the CHC regime, under the following conditions:
   1. Direct or indirect participation in at least 10% of the capital of two or more Colombian and/or foreign companies or entities for a minimum period of 12 months.
   2. Have at least 3 employees, an own address in Colombia and demonstrate that strategic decisions on investments and assets are made from Colombia (not only the minutes of the Shareholders’ Meeting).
2. In order to become a CHC, it must be communicated to the DIAN through the forms provided for this purpose.

3. Dividends or participations distributed by non-resident entities in Colombia to a CHC will be exempt from income in Colombia and are declared as capital exempt income.

4. Dividends distributed by a CHC to a resident individual or to a resident legal entity will be subject to income tax on dividends.

5. Dividends distributed by a CHC to an individual or legal entity not resident in Colombia shall be considered foreign source income and shall not generate income in Colombia, provided that such dividends derive from income attributable to activities carried out by non-resident entities (Section e, Art. 25 ET).

6. Income derived from the sale or transfer of the shares of a CHC by a non-resident person, with respect to the proportion of the sale corresponding to the value created by non-resident entities will also not be considered as income from national source (literal g, art. 25 ET).

7. The benefits of a CHC do not apply when the recipient of the income is domiciled in a non-cooperating or preferential tax jurisdiction.

8. Income derived from the sale or transfer of a CHC’s participation in non-resident entities in Colombia is exempt from income tax in Colombia and must be declared as exempt occasional gains.

9. CHC companies are national “corporations”, so they could be any type of corporation allowed in Colombia.

____________________

The scope of this bulletin is merely informative; any particular situation should be carefully studied with von Bila, de la Pava & Bertoletti.